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Modi's Ouster of Indian Federal Police Chief Rejected by Court

(Bloomberg) -- India’s Supreme Court overturned the federal government’s decision to oust the chief of the country’s top investigative agency in a blow to Prime Minister Narendra Modi just months before he seeks re-election.

The government in October removed Central Bureau of Investigation’s director Alok Verma and special director Rakesh Asthana after their rift -- involving corruption allegations against each other -- became public.

This prompted Verma to challenge the order in the top court. The government said it took the decision as the two top officials of CBI were fighting like "Kilkenny cats," exposing the investigative agency to "public ridicule."

The development is seen as a setback for Modi, who shot to power in 2014 promising a corruption free government, as he pitches for a second term in general elections due by May. The opposition has alleged the government removed Verma because it feared a probe into a controversial $8.7 billion deal to buy Rafale aircraft from France.

"It’s a setback to the government, which is seen as misusing institutions -- including the CBI -- for its favor," said Bhopal-based author and political analyst Girija Shankar. Still, the CBI chief has not been reinstated with his full powers and is restrained from making major policy decisions, he said.

Verma, whose term expires on Jan. 31, called his ouster “patently illegal” as it flouts the two-year fixed term set for the chief of the investigative agency and compromises its independence. Activists also criticized the government for not consulting the panel responsible for CBI chief’s appointments.

The government’s decision to ask Verma to take leave was done to protect the credibility of the institution, Finance Minister Arun Jaitley said in New Delhi.

"In accordance with the direction of the court, the orders will be implemented and the government will act in the same manner," Jaitley said.

While quashing the October order, a three-judge bench headed by Chief Justice Ranjan Gogoi restrained Verma from taking any major policy decisions until the panel that appoints the CBI chief rules on corruption allegations against him.

The CBI -- India’s equivalent of the U.S. Federal Bureau of Investigation -- examines high profile cases that include corruption and economic offenses.